Explaining low economic return on road investments. New evidence from Norway

Halse, Askill Harkjerr and Fridstrøm, Lasse (2019): Explaining low economic return on road investments. New evidence from Norway.

Abstract

Is regional policy to blame for the negative economic return on many road projects, or can road investments give value for money also in remote areas? In Norway, a large majority of planned road projects have negative net benefits according to cost-benefit analysis (CBA). In this paper, we point at geographic characteristics that can explain this, comparing Norway with its neighbors Sweden and Denmark. We then show econometric evidence that such factors also explain a substantial part of the variation in the benefit-cost ratio within Norway. Projects in areas that are far from the largest cities or have difficult topography have lower net benefits. This implies that there is a trade-off between economic efficiency and investing in roads in rural areas with difficult topography. We also discuss the role of road design requirements, decision-making processes and the electoral system for road investment policy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cost-benefit analysis, road investments, regional policy, distributive politics
• Subjects: D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; D - Microeconomics > D7 - Analysis of Collective Decision-Making; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R42 - Government and Private Investment Analysis ; Road Maintenance ; Transportation Planning

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